In its Judgment of 21 November 2013 in case C-284/12 Deutsche Lufthansa, the Court of Justice of the EU has further defined the role of domestic courts hearing State aid cases and has clarified the legal effects that result from an Article 108(2) TFEU Decision whereby the European Commission decides to open a formal investigation and expresses a preliminary opinion on the incompatibility of certain State aid measures with Article 107(1) TFEU.
In the case at hand, Lufthansa intended to avail itself of a Commission's Article 108(2) TFEU Decision that opened an in-depth investigation on certain types of aid received by Ryanair for its activities at Frankfurt Hahn Civil Airport (operated by FFH). Prior to the Commission's investigation, Lufthansa initiated private litigation and sought an order for the recovery of certain payments made to Ryanair and an additional order that there be no future aid for the benefit of Ryanair. The initial dismissal of Lufthansa's action was under appeal when the Commission formally decided to investigate the case.
After learning that the Commission had opened an in-depth investigation, Lufthansa contended that the domestic courts were barred from conducting their separate assessment under Articles 107 and 108 TFEU and were bound to follow the preliminary assessment of the Commission--which indicated that 'each of the measures in question was selective and constituted State aid within the meaning of Article 107(1) TFEU, unless it satisfied the private investor principle. As regards that principle, the Commission noted that, on the basis of the information available to it at the time of the adoption of the [Decision], the airport fees paid by Ryanair were not enough to cover the costs incurred by FFH'.
The German courts were not satisfied and asked the Commission for its opinion under the relevant provisions in the Notice on the enforcement of State aid law by national courts. Unsurprisingly, the Commission supported Lufthansa and replied that the domestic court itself was not required to assess whether the measures in question could or could not be classified as State aid as it could take the Commission's Decision as a basis for drawing all the necessary inferences from the infringement of Article 108(3) TFEU. The German court was still not persuaded and made a preliminary reference.
In its Lufthansa Judgment, the CJEU has ruled that:
37 While the assessments carried out in the decision to initiate the formal examination procedure are indeed preliminary in nature, that does not mean that the decision lacks legal effects.
38 It must be pointed out in that regard that, if national courts were able to hold that a measure does not constitute aid within the meaning of Article 107(1) TFEU and, therefore, not to suspend its implementation, even though the Commission had just stated in its decision to initiate the formal examination procedure that that measure was capable of presenting aid elements, the effectiveness of Article 108(3) TFEU would be frustrated.
39 On the one hand, if the preliminary assessment in the decision to initiate the formal examination procedure is that the measure at issue constitutes aid and that assessment is subsequently confirmed in the final decision of the Commission, the national courts would have failed to observe their obligation under Article 108(3) TFEU [...] to suspend the implementation of any aid proposal until the adoption of the Commission’s decision on the compatibility of that proposal with the internal market.
40 On the other hand, even if in its final decision the Commission were to conclude that there were no aid elements, the preventive aim of the State aid control system established by the TFEU [...] requires that, following the doubt raised in the decision to initiate the formal examination procedure as to the aid character of that measure and its compatibility with the internal market, its implementation should be deferred until that doubt is resolved by the Commission’s final decision.
41 It is also important to note that the application of the European Union rules on State aid is based on an obligation of sincere cooperation between the national courts, on the one hand, and the Commission and the Courts of the European Union, on the other, in the context of which each acts on the basis of the role assigned to it by the Treaty. In the context of that cooperation, national courts must take all the necessary measures, whether general or specific, to ensure fulfilment of the obligations under European Union law and refrain from those which may jeopardise the attainment of the objectives of the Treaty, as follows from Article 4(3) TEU. Therefore, national courts must, in particular, refrain from taking decisions which conflict with a decision of the Commission, even if it is provisional.
42 Consequently, where the Commission has initiated the formal examination procedure with regard to a measure which is being implemented, national courts are required to adopt all the necessary measures with a view to drawing the appropriate conclusions from an infringement of the obligation to suspend the implementation of that measure (C-284/12, paras 37-42, emphasis added).
So far, the solution is clear cut and seems to impose a very clear preference for Commission (preliminary) assessment over any other assessment independently carried out by domestic courts. This would strengthen the one stop shop approach derived from the Commission's monopoly over the enforcement of Article 107 and 108 [except for the direct effect of 108(3) TFEU] and would strengthen the current centralised enforcement system.
However, in the two followning paragraphs, the CJEU muddies the waters by further ellaborating and indicating that:43 To that end [ie to draw the appropriate conclusions from an infringement of the obligation to suspend the implementation of that measure] national courts may decide to suspend the implementation of the measure in question and order the recovery of payments already made. They may also decide to order provisional measures in order to safeguard both the interests of the parties concerned and the effectiveness of the Commission’s decision to initiate the formal examination procedure.
44 Where they entertain doubts as to whether the measure at issue constitutes State aid within the meaning of Article 107(1) TFEU or as to the validity or interpretation of the decision to initiate the formal examination procedure, national courts may seek clarification from the Commission and, in accordance with the second and third paragraphs of Article 267 TFEU, as interpreted by the Court, they may or must refer a question to the Court for a preliminary ruling (see, to that effect, as regards requests for preliminary rulings on the validity of State aid, Case C-222/04 Cassa di Risparmio di Firenze and Others [2006] ECR I-289, paragraphs 72 to 74) (C-284/12, paras 43-44, emphasis added).
In my view, this reopens the question and destroys the one stop shop approach (or, in more clear terms, the approach in para 44 basically deactivates all the reasoning in paras 39-40 and introduces a level of uncertainty and procedural complication that seems unnecessary). And I wonder where are the concerns about the effectiveness of Article 108(3) TFEU that had previously been alluded to in para 38, particularly if the preliminary reference is made before any interim measures are adopted (and what would be the use for it otherwise?).
As I already indicated when I criticised the Advocate General's Opinion in this case (here), this can create significant complications by way of parallel procedures (before the Commission, the national courts and the CJEU) in one and the same case. Such duplication of procedures can only result in a waste of resources and, most likely, in legal uncertainty and potentially contradictory outcomes.
Leaving the door open for a reference for a preliminary ruling (of validity) against a provisional assessment of the European Commission is excessively deferential towards domestic courts and can have significant undesirable effects. This is not satisfactory and it starts to be evident that there is a need for the adoption of a more streamlined procedural system where (in the absence of a decentralised enforcement system for State aid, which may well be superior), national courts would have to suspend their powers of interpretation of the concept of aid and limit their role to the adoption of effective interim measures when the Commission is still completing its investigation on a given measure.
In my view, this could be easily achieved by simply applying Article 4(3) of the Treaty on European Union, since the need for sincere cooperation in this type of matters seems out of the question (an argument the CJEU has used differently in Lufthansa). Nonetheless, it is now clear that the CJEU is not willing to go very far in striking a more sustainable balance between the sphere of jurisdiction/competence of domestic courts and ensuring a manageable procedural system in State aid law. In my view, domestic courts should resort to the possibilities outlined in para 44 of the Lufthansa Judgment only in very extreme cases (if ever).
In my view, this could be easily achieved by simply applying Article 4(3) of the Treaty on European Union, since the need for sincere cooperation in this type of matters seems out of the question (an argument the CJEU has used differently in Lufthansa). Nonetheless, it is now clear that the CJEU is not willing to go very far in striking a more sustainable balance between the sphere of jurisdiction/competence of domestic courts and ensuring a manageable procedural system in State aid law. In my view, domestic courts should resort to the possibilities outlined in para 44 of the Lufthansa Judgment only in very extreme cases (if ever).